Accounting & Auditing Update

EY may be taking steps to draw a broader line between audit and consulting services in the U.K., but the U.S. firm has no such plans. Meanwhile, PwC is silent.

Grant Thornton is joining the Big 4 in appointing more leadership to its firm governance to drive more focus on audit quality.

EY has joined the rest of the Big Four in seeking independent consult on audit quality, forming a committee of outside experts to advise firm leaders.

Big 4 firms are performing fewer public company audits as the number of public companies continues to decline, according to Audit Analytics.

Auditors will show some deference to judgment calls when the CFO of the client company is an alumni of the audit firm, according to emerging academic research.

When reports begin to emerge on the latest inspection findings for the major audit firms, they will show no broad, appreciable improvements over the prior year.

Based on its latest round of audit inspections in 2017, the PCAOB found some improvement at some firms, but still plenty of work to do to meet standards.

Big 4 firms say the SEC won’t object if certain “public business entities” adopt new revenue and leasing rules under private company effective dates.

Roughly half the audits inspected at BDO USA contained deficiencies in 2015, several serious enough to result in restatements and withdrawn ICFR opinions.

Audit quality is an even bigger concern outside the United States, where inspectors spot deficiencies at major network firms in 42 percent of the audits they check.

In the churn for new auditors, one Big 4 firm has held steady with its net number of audit clients while three others have seen net losses numbering in the 20s. Tammy Whitehouse has the results of the latest data from Audit Analytics.

U.S. audit regulators have settled a $1 million action with an EY affiliate in Indonesia over allegations of audit failure and noncooperation.

The PCAOB has published its last 2014 inspection report on the eight largest firms, showing gains at Grant Thornton from a year prior and slight improvement across major firms. Tammy Whitehouse reports.

More Big 4 surveys on big accounting changes suggest companies are starting to face a kind of paralysis over how to move forward and make it all work. On revenue recognition a recent KPMG poll suggests the vast majority of companies are still trying to digest how it will affect them. On lease accounting, three polls suggest companies are wringing their hands over how they will comply.

Big 4 firms exhibited problems in 35 percent of all audit engagements inspected in 2014, and a whopping 84 percent of those deficient audits involved problems with internal control over financial reporting, according to an analysis by Dan Goelzer, a former member and acting chair of the PCAOB. The analysis shows the board found fault with slightly fewer Big 4 engagements in 2014 compared with 2013, but the share that involved problems with the internal control audit was even higher at 89 percent.

Global affiliates of the six largest accounting firms turn in strikingly different inspection results compared with their U.S. affiliates. PCAOB research shows. Deloitte U.S., for example, has been reducing the rate of deficiencies in its inspections from 2011 through 2013, but Deloitte’s global affiliates have turned in much higher rates. PCAOB member Lewis Ferguson cautions, “It would be a mistake to presume that an audit firm’s inspection results in the United States necessarily speak to the quality of its global network.” Details inside.

Big 4 firms lost a combined 64 public company audit engagements in 2014 as second-tier national firms snatched up a combined 58 new clients, according to Audit Analytics. The company’s annual summary of auditor changes says KPMG is the only Big 4 firm to win more new engagements than it lost in 2014. More inside.

The SEC has settled its action against Big 4 affiliates in China that had stymied investigations into possible accounting fraud by refusing to hand over audit work papers. The SEC fined each of the Big 4 affiliates $500,000 while acknowledging that the firms eventually began providing documents.